The Bank of Russia (BoR) shared its Central bank digital currency (CBDC) business model that includes free consumer-to-consumer payments. However, local banks are fighting back, accusing the government of planning to put them out of business.
Two years ago, Russia’s CBDC development was moving slowly. Then came the sanctions after his conflict with Ukraine, and since then the central bank has accelerated the development of the digital ruble to ease the pain of sanctions. In its latest move, it has published the business model for the CBDC, which it expects to launch in the first half of next year.
The key to the BoR’s plan to stimulate the adoption of the digital ruble is to make it the cheapest payment method in Russia. For this end, all Payments between retail consumers will be free permanently. Businesses that send digital cash to merchant users will also not incur fees. Consumer-to-business (C2B) and business-to-business (B2B) payments will incur fees, but the central bank is giving users a one-year grace period of zero fees to bring adoption.
When the fees come in, the central bank collects them and then distributes a portion to payment platform operators, be they banks or fintech apps. For B2B payments, BoR takes a third of the fees and a sixth for C2B payments.
In B2B payments, Top Bank will charge a flat rate of 15 rubles ($0.14) and then transfer 10 rubles ($0.1) to the payment provider of the paying business.
C2B payments will be more complex. The receiving business will pay 0.3% in fees, with an upper cap of $14.34. The payment platform used by the paying consumer receives a third of the fees, with a maximum of $5. The receiving business’s payment platform gets a slightly bigger cut, but it ends up at $7.3. However, BoR will to subsidize Payments relating to essentials such as housing and community services.
BoR believes that the low fees of the digital ruble – and zero fees in some transactions – will attract Russians. Digital payments are on an uptrend in the country, sloppy from 38% in the first quarter of 2017 to 63% in Q1 2023.
Russian banks against digital ruble
Despite the promise of the CBDC, Russian banks are against the implementation of the digital ruble. In particular, lenders have criticized the high implementation costs and the government’s apparent plan to drive them out of business.
Appearing before the parliament, the head of the Association of Russian Banks (ABR), Anatoly Kozlachkov, told the legislators that the costs for the banks are prohibitedclaimed they could go as high as 100 million rubles ($1 million) for each bank.
“The cost ratios for the introduction of the digital ruble should be adjusted – or approaches should be differentiated, taking into account the specifics of the players,” Kozlachkov told the State Duma, as reported from a local outlet.
Banks are also concerned about disintermediation and the risk of liquidity outflows when the CBDC is live. In most economies, central banks have imposed a holding cap on their CBDCs, which can limit the amount of money users can hold outside of the banking sector. The European Union, for example, has a €3,000 and €4,000 cap for the digital euro.
However, some lawmakers dismissed the banks’ concerns. One is Anatoly Aksakov, the influential head of the State Duma Committee on Financial Markets, who said he still could not understand the resistance of lenders. Aksakov previously claimed that banks may no longer be needed in Russia once the digital ruble launches.
Neo-banking leader T-Bank to launch tokenized investments
Still in Russia, the country’s largest neo-bank, T-Bank, has launched tokenized investment services for its customers from next year.
The lender, earlier known as Tinkoff Bank, received a license from the BoR in March ‘to offer digital financial assets. It joins its rivals, Sber Bank and Alfa Bank, who currently dominate this nascent field.
T-Bank announced that it has partnered with Atomyze, a local tokenization company, to launch the tokens. The tokens underpin loan products, financial obligations of small and medium-sized enterprises (SMEs), art tokens, and more. They are issued on a private blockchain network developed by Atomyze (which was sanctioned of the United States this year) and monitored by the central bank.
T-Bank says that the use of blockchain and Smart contracts allows it to reduce the cost of the issue and “create fundamentally new products that are currently not available on the traditional financial market.”
The bank, founded by now exiled Oleg Tinkov in 2006, will also launch the trading infrastructure for the token. Retail users will have access in a few months, and professional customers can start trading in a few weeks.
See: Find ways to use CBDC outside of digital currencies
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